Question 1

Which of the following involves settling accounts and liquidating assets of a partnership for the purpose of making distributions and ending the partnership?

Accepted Answer

A)  Debt resolution 
B)  Bypassing formalities 
C)  Termination 
D)  Winding-up 
A)  Debt resolution 
B)  Bypassing formalities 
C)  Termination 
D)  Winding-up

Question 2

Define class voting.Why would a group of investors be interested in a guarantee of class voting?

Accepted Answer

Class voting occurs when the charter or

Question 3

Any corporation not meeting the requirements for an S corporation is automatically a C corporation.

Accepted Answer

A) True 
 B)False

Question 4

Mike owns a small but successful coffee house.He decides to incorporate.Considering only tax benefits,should Mike form a C corporation or a subchapter S corporation and why? Discuss taxation under both forms.

Accepted Answer

Mike should form an S corporation in ord

Question 5

If a sole proprietorship operates under a fictitious business name,then that name must be registered with the state.

Accepted Answer

A) True 
 B)False

Question 6

__________ refers to a method by which courts hold shareholders individually liable for claims against a corporation.

Accepted Answer

A)  Reverse liability 
B)  Piercing the corporate veil 
C)  Upholding the ethical theory 
D)  Unveiling 
A)  Reverse liability 
B)  Piercing the corporate veil 
C)  Upholding the ethical theory 
D)  Unveiling

Question 7

Which of the following requirements is not required by a corporation to qualify for S corporation status?

Accepted Answer

A)  The corporation must have only one class of stock. 
B)  The corporation must file a timely election signed by all the shareholders to be treated as an S corporation. 
C)  The corporation must have no more than twenty-five shareholders. 
D)  The corporation must be a domestic corporation. 
A)  The corporation must have only one class of stock. 
B)  The corporation must file a timely election signed by all the shareholders to be treated as an S corporation. 
C)  The corporation must have no more than twenty-five shareholders. 
D)  The corporation must be a domestic corporation.

Question 8

If a business is operated by a partnership,LLC,or S corporation,then operating losses will be passed through to the individual partners or shareholders.

Accepted Answer

A) True 
 B)False

Question 9

B corporations have no duty to maximize shareholder value even when there is a change of control.

Accepted Answer

A) True 
 B)False

Question 10

Federal law governs the obligations,if any,that members of a limited liability partnership owe to creditors.

Accepted Answer

A) True 
 B)False

Question 11

The S-Corporation is the entity of choice that helps venture capitalists raise investment capital.

Accepted Answer

A) True 
 B)False

Question 12

Fact Pattern 19-1
Joan decides to enter into a franchise agreement with XYZ Burgers to sell their burgers in her town. The franchise agreement did not prohibit XYZ Burgers from granting other franchises in the area, but that did not concern Joan because she thought XYZ Burgers would treat her fairly. She did not bother to read the franchise papers, contracts, and disclosures she was provided. Joan's business went very well for the six months. Then, however, another XYZ Burgers franchise opened just down the street from Joan's restaurant. She was very upset and called XYZ Burgers to complain. The CEO brushed off her concerns and told her that there was enough business for everyone. Joan, however, is interested in suing XYZ Burgers.
-Refer to Fact Pattern 19-1.What is the position of the Federal Trade Commission regarding a franchisor selling a franchise very near to an existing franchise?

Accepted Answer

A)  That the practice is illegal. 
B)  That the practice is illegal unless the first franchisee provides specific permission for the sale to the second franchisee. 
C)  That the practice is legal and that no disclosures are required. 
D)  That the practice is legal but that certain disclosures must be made to the first franchisee when that agreement is made. 
A)  That the practice is illegal. 
B)  That the practice is illegal unless the first franchisee provides specific permission for the sale to the second franchisee. 
C)  That the practice is legal and that no disclosures are required. 
D)  That the practice is legal but that certain disclosures must be made to the first franchisee when that agreement is made.

Question 13

Which of the following refers to a merger in which some shareholders are required to surrender their shares in the disappearing corporation for cash?

Accepted Answer

A)  Illegal merger 
B)  Termination merger 
C)  Surrender consolidation 
D)  Freeze-out merger 
A)  Illegal merger 
B)  Termination merger 
C)  Surrender consolidation 
D)  Freeze-out merger

Question 14

The main issue in CASE 19.3Burwell v.Hobby Lobby Stores,Inc.(2014)involved a question of whetherthe requirements for contraception under the Affordable Care Act (Obamacare)violated the due process rights of Hobby Lobby Stores.

Accepted Answer

A) True 
 B)False

Question 15

In a joint venture,the authority of one member to bind the partnership is more limited than in a general partnership.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is true regarding incorporation?

Accepted Answer

A)  A corporation must be incorporated in the state in which it has its principal place of business. 
B)  Laws regarding incorporation and the rights and duties of corporations are uniform from state to state. 
C)  Since the mid-1930's, Delaware has been considered the preeminent state for incorporation. 
D)  Incorporation may be done pursuant to common law as well as statute. 
A)  A corporation must be incorporated in the state in which it has its principal place of business. 
B)  Laws regarding incorporation and the rights and duties of corporations are uniform from state to state. 
C)  Since the mid-1930's, Delaware has been considered the preeminent state for incorporation. 
D)  Incorporation may be done pursuant to common law as well as statute.

Question 17

Which of the following is true regarding taxation of losses of a C corporation?

Accepted Answer

A)  The operating loss is passed on to shareholders, but the corporation itself does not realize any benefit. 
B)  The operating loss is recognized at the corporate level, and shareholders also receive a tax benefit. 
C)  The operating loss will be recognized at the corporate level, shareholders receive no tax benefit, and the corporation receives no benefit until it has operating income against which its prior losses can be deducted. 
D)  The operating loss is not recognized at the corporate level; and although shareholders may receive a deduction, they must wait until they receive some amount of profit from the corporation at which point they can deduct up to 10% of the losses per year. 
A)  The operating loss is passed on to shareholders, but the corporation itself does not realize any benefit. 
B)  The operating loss is recognized at the corporate level, and shareholders also receive a tax benefit. 
C)  The operating loss will be recognized at the corporate level, shareholders receive no tax benefit, and the corporation receives no benefit until it has operating income against which its prior losses can be deducted. 
D)  The operating loss is not recognized at the corporate level; and although shareholders may receive a deduction, they must wait until they receive some amount of profit from the corporation at which point they can deduct up to 10% of the losses per year.

Question 18

__________ of a general partnership occurs when all the affairs are wound up and the partners' authority to act for the partnership is completely extinguished.

Accepted Answer

A)  Dissolution 
B)  Termination 
C)  Winding up 
D)  Staged end 
A)  Dissolution 
B)  Termination 
C)  Winding up 
D)  Staged end

Question 19

An S corporation would likely be used as the corporate form for a business intending to raise money from venture capitalists.

Accepted Answer

A) True 
 B)False

Question 20

A corporation that is technically defective but that is formed in good faith and exercises corporate power is known as a de jure corporation.

Accepted Answer

A) True 
 B)False

Exam 19: Forms of Business Organizations.

Which of the following involves settling accounts and liquidating assets of a partnership for the purpose of making distributions and ending the partnership?

Define class voting.Why would a group of investors be interested in a guarantee of class voting?

Any corporation not meeting the requirements for an S corporation is automatically a C corporation.

Mike owns a small but successful coffee house.He decides to incorporate.Considering only tax benefits,should Mike form a C corporation or a subchapter S corporation and why? Discuss taxation under both forms.

If a sole proprietorship operates under a fictitious business name,then that name must be registered with the state.

__________ refers to a method by which courts hold shareholders individually liable for claims against a corporation.

Which of the following requirements is not required by a corporation to qualify for S corporation status?

If a business is operated by a partnership,LLC,or S corporation,then operating losses will be passed through to the individual partners or shareholders.

B corporations have no duty to maximize shareholder value even when there is a change of control.

Federal law governs the obligations,if any,that members of a limited liability partnership owe to creditors.

The S-Corporation is the entity of choice that helps venture capitalists raise investment capital.

Which of the following refers to a merger in which some shareholders are required to surrender their shares in the disappearing corporation for cash?

The main issue in CASE 19.3Burwell v.Hobby Lobby Stores,Inc.(2014)involved a question of whetherthe requirements for contraception under the Affordable Care Act (Obamacare)violated the due process rights of Hobby Lobby Stores.

In a joint venture,the authority of one member to bind the partnership is more limited than in a general partnership.

Which of the following is true regarding incorporation?

Which of the following is true regarding taxation of losses of a C corporation?

__________ of a general partnership occurs when all the affairs are wound up and the partners' authority to act for the partnership is completely extinguished.

An S corporation would likely be used as the corporate form for a business intending to raise money from venture capitalists.

A corporation that is technically defective but that is formed in good faith and exercises corporate power is known as a de jure corporation.

Law, Value Creation, and Risk Management.

Ethics and the Law.

Sources of Law, Courts, and Dispute Resolution.

Constitutional Bases for Business Regulation.

Agency.

Administrative Law.

Contracts.

Sales, Licensing, and E-Commerce.

Torts and Privacy Protection.

Product Liability.

Intellectual Property.

The Employment Agreement.

Civil Rights and Employment Discrimination.

Criminal Law.

Environmental Law and Sustainability.

Antitrust.

Consumer Protection.

Real Property and Land Use.

Directors, Officers, and Controlling Shareholders.

Public and Private Offerings of Securities.

Securities Fraud and Insider Trading.

Debtor-Creditor Relations and Bankruptcy.

International Law and Transactions.

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